10-Q/A

FORM 10-Q/A

(MARK ONE)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.

COMMISSION FILE NUMBER: 000-21433

FORRESTER RESEARCH, INC.

(Exact name of registrant as specified in its charter)

DELAWARE	04-2797789
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)
400 TECHNOLOGY SQUARE
CAMBRIDGE, MASSACHUSETTS	02139
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (617) 613 — 6000

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes R No £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one).

Large accelerated filer £ Accelerated filer R Non-accelerated filer £

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes £ No R

As of November 4, 2005, 21,294,464 shares of the registrant’s common stock were outstanding.

FORRESTER RESEARCH, INC.

INDEX TO FORM 10-Q/A

	PAGE
EXPLANATORY NOTE		3
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements		4
Consolidated Balance Sheets as of September 30, 2005 (restated) and December 31, 2004		4
Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2005 (restated) and 2004		5
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2005 (restated) and 2004		6
Notes to Consolidated Financial Statements (restated)		7
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (restated)		15
ITEM 4. Controls and Procedures		23
PART II. OTHER INFORMATION
ITEM 6. Exhibits		25
EX-31.1 Section 302 Certification of CEO
EX-31.2 Section 302 Certification of CFO
EX-32.1 Section 906 certification of CEO
EX-32.2 Section 906 Certification of CFO

2

EXPLANATORY NOTE

We are filing this Quarterly Report on Form 10-Q/A (the “Amended Report”) to correct an error in the accounting for performance-based stock options to purchase 940,500 shares of common stock granted on March 31, 2005, reflected in our financial statements reported on Form 10-Q for the period ended September 30, 2005 (the “Original Report”). As a result of the error, we did not record non-cash stock-based compensation expense of approximately $729,000 and $1,019,000 for the three and nine month periods ended September 30, 2005 as required by Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees.” We are filing this Amended Report in order to restate our financial statements to reflect this expense and the related income tax effect.

For the reason discussed above, we are filing this Amended Report in order to amend Part I. Item 1. “Financial Statements,” Part I. Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” Part I. Item 4. “Controls and Procedures” and Part II. Item 6 “Exhibits” to the extent necessary to reflect the adjustment discussed above and to reflect the results of our evaluations of disclosure controls and procedures and internal control over financial reporting, taking into consideration this restatement. The remaining Items of our Original Report are not amended hereby.

In order to preserve the nature and character of the disclosures set forth in the Original Report, except as expressly noted above, this report speaks as of the date of the filing of the Original Report, November 8, 2005, and we have not updated the disclosures in this report to speak as of the later date. All information contained in this Amended Report is subject to updating and supplementing as provided in our reports filed with the SEC subsequent to the date of the Original Report.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FORRESTER RESEARCH, INC.

CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)

	SEPTEMBER 30,			DECEMBER 31,
	2005			2004
	(UNAUDITED)
	(restated)
ASSETS
Current assets:
Cash and cash equivalents	$	52,468		$	37,328
Marketable securities		82,090			90,112
Accounts receivable, net		28,653			39,210
Deferred commissions		6,314			6,834
Prepaid expenses and other current assets		5,626			5,509
Total current assets		175,151			178,993
Long-term assets:
Property and equipment, net		6,080			6,410
Goodwill		52,915			52,875
Deferred income taxes		43,283			42,860
Non-marketable investments		13,493			13,430
Intangible assets, net		4,320			6,992
Other assets		780			1,312
Total long-term assets		120,871			123,879
Total assets	$	296,022		$	302,872
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,956		$	3,741
Accrued expenses		26,379			26,928
Deferred revenue		67,671			72,357
Total current liabilities		96,006			103,026
Stockholders’ equity:
Preferred stock, $.01 par value Authorized — 500 shares Issued and outstanding — none		—			—
Common stock, $.01 par value Authorized — 125,000 shares Issued — 25,267 and 24,729 shares as of September 30, 2005 and December 31, 2004, respectively
Outstanding — 21,280 and 21,684 shares as of September 30, 2005 and December 31, 2004, respectively		253			247
Additional paid-in capital		189,777			180,310
Retained earnings		78,831			71,077
Treasury stock, at cost — 3,987 and 3,045 shares as of September 30, 2005 and December 31, 2004, respectively		(66,314	)		(50,056	)
Accumulated other comprehensive loss		(2,531	)		(1,732	)
Total stockholders’ equity		200,016			199,846
Total liabilities and stockholders’ equity	$	296,022		$	302,872

The accompanying notes are an integral part of these consolidated financial statements.

4

FORRESTER RESEARCH, INC.

CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)

	THREE MONTHS ENDED				NINE MONTHS ENDED
	SEPTEMBER 30,				SEPTEMBER 30,
	2005		2004		2005		2004
			(UNAUDITED)
	(restated)				(restated)
Revenues:
Research services	$	24,987	$	23,544	$	72,203	$	69,579
Advisory services and other		14,038		10,335		39,850		30,950
Total revenues		39,025		33,879		112,053		100,529
Operating expenses:
Cost of services and fulfillment		15,758		13,266		46,207		40,782
Selling and marketing		12,717		11,036		37,685		33,701
General and administrative		4,843		4,291		13,361		11,687
Depreciation		859		744		2,615		2,801
Amortization of intangible assets		786		1,384		2,742		5,112
Reorganization costs		—		—		—		8,751
Total operating expenses		34,963		30,721		102,610		102,834
Income (loss) from operations		4,062		3,158		9,443		(2,305	)
Other income:
Other income, net		722		680		2,226		2,168
Realized gains on sales of securities		—		678		1,489		678
Realized gains on non-marketable investments		241		313		532		370
Income before income tax provision		5,025		4,829		13,690		911
Income tax provision		2,467		1,618		5,936		305
Net income	$	2,558	$	3,211	$	7,754	$	606
Basic net income per common share	$	0.12	$	0.15	$	0.36	$	0.03
Diluted net income per common share	$	0.12	$	0.14	$	0.35	$	0.03
Basic weighted average common shares outstanding		21,287		21,952		21,470		22,094
Diluted weighted average common shares outstanding		21,931		22,345		21,872		22,577

The accompanying notes are an integral part of these consolidated financial statements.

5

FORRESTER RESEARCH, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

	NINE MONTHS ENDED
	SEPTEMBER 30,
	2005			2004
	(UNAUDITED)
	(restated)
Cash flows from operating activities:
Net income	$	7,754		$	606
Adjustments to reconcile net income to net cash provided by operating activities —
Depreciation		2,615			2,801
Amortization of intangible assets		2,742			5,112
Realized gains on sales of securities		(1,489	)		(678	)
Realized gains on non-marketable investments		(532	)		(370	)
Tax benefit from exercises of employee stock options		1,243			256
Deferred income taxes		(739	)		(2	)
Non-cash reorganization costs		—			1,541
Non-cash stock-based compensation		1,019			—
Increase in provision for doubtful accounts		100			224
Amortization of premium on marketable securities		829			635
Changes in assets and liabilities, net of acquisition —
Accounts receivable		9,282			15,541
Deferred commissions		520			849
Prepaid expenses and other current assets		(294	)		(296	)
Accounts payable		(1,785	)		(116	)
Accrued expenses		1,234			(3,722	)
Deferred revenue		(2,572	)		(8,770	)
Net cash provided by operating activities		19,927			13,611
Cash flows from investing activities:
Purchases of property and equipment		(2,376	)		(2,423	)
Purchases of non-marketable investments		(300	)		(2,263	)
Proceeds from non-marketable investments		516			—
Decrease in other assets		788			842
Purchases of marketable securities		(179,612	)		(107,478	)
Proceeds from sales and maturities of marketable securities		185,776			121,623
Net cash provided by investing activities		4,792			10,301
Cash flows from financing activities:
Proceeds from issuance of common stock		7,201			2,959
Acquisition of treasury stock		(16,258	)		(12,623	)
Structured stock repurchase		—			54
Net cash used in financing activities		(9,057	)		(9,610	)
Effect of exchange rate changes on cash and cash equivalents		(522	)		(66	)
Net increase in cash and cash equivalents		15,140			14,236
Cash and cash equivalents, beginning of period		37,328			22,385
Cash and cash equivalents, end of period	$	52,468		$	36,621
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	509		$	1,201

The accompanying notes are an integral part of these consolidated financial statements.

6

FORRESTER RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for reporting on Form 10-Q. Accordingly, certain information and footnote disclosures required for complete financial statements are not included herein. It is recommended that these financial statements be read in conjunction with the consolidated financial statements and related notes that appear in the Annual Report of Forrester Research, Inc. (“Forrester”) as reported on Form 10-K for the year ended December 31, 2004. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the financial position, results of operations, and cash flows as of the dates and for the periods presented have been included. The results of operations for the nine months ended September 30, 2005 may not be indicative of the results that may be expected for the year ended December 31, 2005, or any other period.

Forrester is restating the financial results included in its previously issued consolidated financial statements as of September 30, 2005 and for the periods ended September 30, 2005, to correct an error under GAAP relating to non-cash stock-based compensation expense. Such adjustments are reflected in the accompanying consolidated financial statements and notes thereto, as discussed in Note 2 below.

Stock-Based Compensation

Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation” and SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure” requires the measurement of the fair value of stock options or warrants to be included in the statement of income or disclosed in the notes to financial statements. Forrester has determined it will continue to account for stock-based compensation for employees under Accounting Principles Board Opinion (“APB”) No. 25 and elect the disclosure-only alternative under SFAS No. 123.

On March 31, 2005, Forrester issued stock options to its employees to purchase 940,500 shares of common stock. These options vest only if certain pro-forma earnings per share (“EPS”) goals are achieved for the year ended December 31, 2005. The vesting of these options will be over 24 or 36 months, or the options could be forfeited, depending on the actual pro-forma EPS achieved. Under APB No. 25, these stock options are accounted for as options with variable terms until the performance criteria are met based upon 2005 financial performance, as the awards contain performance criteria that could result in the forfeiture of the entire stock option. For the three and nine month periods ended September 30, 2005, Forrester recorded non-cash stock-based compensation expense of $729,000 and $1,019,000, respectively. The compensation expense represents the vested portion of the intrinsic value of the options granted and is based on an estimated vesting period of 36 months. The total non-cash stock-based compensation expense included in the consolidated statements of income is included in the following expense categories (in thousands):

	THREE MONTHS ENDED				NINE MONTHS ENDED
	SEPTEMBER 30,				SEPTEMBER 30,
	2005		2004		2005		2004
	(UNAUDITED)
	(restated)				(restated)
Cost of services and fulfillment	$	400		—	$	559		—
Selling and marketing		158		—		221		—
General and administrative		171		—		239		—
Total	$	729		—	$	1,019		—

Compensation expense will be measured throughout the performance period based upon the intrinsic value of the options and will be recognized over the estimated vesting period.

7

If compensation cost for Forrester’s stock option plans had been determined using the fair value method prescribed in SFAS No. 123, net income (loss) for the three and nine months ended September 30, 2005 and 2004 would have been approximately as follows (in thousands, except per share data):

	THREE MONTHS ENDED						NINE MONTHS ENDED
	SEPTEMBER 30,						SEPTEMBER 30,
	2005			2004			2005			2004
	(IN THOUSANDS)						(IN THOUSANDS)
	(restated)						(restated)
Net income, as reported	$	2,558		$	3,211		$	7,754		$	606
Add: Non-cash stock-based compensation expense		729			—			1,019			—
Less: Total stock-based employee compensation expense determined under fair value based method for all awards		(973	)		(1,045	)		(2,919	)		(3,334	)
Pro-forma net income (loss)	$	2,314		$	2,166		$	5,854		$	(2,728	)
Basic net income per share — as reported	$	0.12		$	0.15		$	0.36		$	0.03
Diluted net income per share — as reported	$	0.12		$	0.14		$	0.35		$	0.03
Basic net income (loss) per share — pro forma	$	0.11		$	0.10		$	0.27		$	(0.12	)
Diluted net income (loss) per share — pro forma	$	0.11		$	0.10		$	0.27		$	(0.12	)

Income Taxes

Forrester provides for income taxes on an interim basis according to management’s estimate of the effective tax rate expected to be applicable for the full fiscal year ending December 31.

8

NOTE 2 — RESTATEMENT

The previously issued consolidated financial statements as of September 30, 2005 and for the three and nine month periods ended September 30, 2005, have been restated to correct an error in the accounting for performance-based common stock options granted on March 31, 2005. On March 31, 2005, Forrester issued performance-based stock options to employees to purchase a total of 940,500 shares of common stock that are based upon attainment of 2005 financial goals. Because the number of option shares were not fixed at the time of grant, Forrester was required to account for these options as options with variable terms until the performance criteria were met. As a result, non-cash stock-based compensation expense of $729,000 and $1,019,000 related to this option grant, and $60,000 and $83,000 of related tax benefit, is reflected in the accompanying consolidated financial statements for the three and nine month periods ended September 30, 2005, respectively.

The following lists the accounts in the consolidated statements of income and balance sheet that were affected by the aforementioned restatement, with comparisons of the restated amounts to the originally reported amounts and the effect of such restatements on net income per share:

	THREE MONTHS ENDED				NINE MONTHS ENDED
	SEPTEMBER 30, 2005				SEPTEMBER 30, 2005
			(IN THOUSANDS, EXCEPT PER SHARE DATA)
	As restated		As reported		As restated		As reported
Cost of services and fulfillment	$	15,758	$	15,358	$	46,207	$	45,648
Selling and marketing	$	12,717	$	12,559	$	37,685	$	37,464
General and administrative	$	4,843	$	4,672	$	13,361	$	13,122
Total operating expenses	$	34,963	$	34,234	$	102,610	$	101,591
Income from operations	$	4,062	$	4,791	$	9,443	$	10,462
Income before income tax provision	$	5,025	$	5,754	$	13,690	$	14,709
Income tax provision	$	2,467	$	2,527	$	5,936	$	6,019
Net income	$	2,558	$	3,227	$	7,754	$	8,690
Basic net income per share	$	0.12	$	0.15	$	0.36	$	0.40
Diluted net income per share	$	0.12	$	0.15	$	0.35	$	0.40

	SEPTEMBER 30, 2005
	(IN THOUSANDS)
	As restated		As reported
Accrued expenses	$	26,379	$	26,462
Total current liabilities	$	96,006	$	96,089
Additional paid-in capital	$	189,777	$	188,758
Retained earnings	$	78,831	$	79,767
Total stockholders’ equity	$	200,016	$	199,933

All applicable amounts relating to the aforementioned restatements have been reflected in these consolidated financial statements and notes hereto.

9

NOTE 3 — INTANGIBLE ASSETS

A summary of Forrester’s amortizable intangible assets as of September 30, 2005 is as follows:

	GROSS CARRYING		ACCUMULATED		NET
	AMOUNT		AMORTIZATION		CARRYING AMOUNT
	(IN THOUSANDS)
Amortized intangible assets:
Customer relationships	$	19,960	$	15,640	$	4,320
Research content		2,444		2,444		—
Registered trademarks		570		570		—
Subtotal	$	22,974	$	18,654	$	4,320

Amortization expense related to identifiable intangible assets was approximately $786,000 and $1,384,000 during the three months ended September 30, 2005 and 2004, respectively, and $2,742,000 and $5,112,000 during the nine months ended September 30, 2005 and 2004, respectively. Estimated amortization expense related to identifiable intangible assets that will continue to be amortized is as follows:

	AMOUNTS
	(IN THOUSANDS)
Remaining three months ending December 31, 2005	$	786
Year ending December 31, 2006		2,069
Year ending December 31, 2007		1,234
Year ending December 31, 2008		231
Total	$	4,320

NOTE 4 — REORGANIZATIONS

In November 2003, Forrester acquired the assets of GigaGroup S.A. (“GigaGroup”). In January 2004, Forrester announced a reduction of its workforce by approximately 15 positions in connection with the integration of GigaGroup’s operations. As a result, Forrester recorded an initial reorganization charge of $1,957,000 during the three months ended March 31, 2004. Approximately 53% of the terminated employees had been members of the sales force, while 27% and 20% had held administrative and research roles, respectively. The charge consisted primarily of severance and related benefit costs, and other payments for professional services incurred in connection with the reorganization. During the three-months ended June 30, 2004 and December 31, 2004, Forrester provided for additional severance and related benefits costs of $240,000 and $313,000, respectively.

In connection with the integration of GigaGroup’s operations, Forrester vacated and subleased office space in San Francisco, Amsterdam and London during the three-months ended June 30, 2004. As a result of these vacancies and related subleases, Forrester recorded reorganization charges of approximately $4,693,000 related to the excess of contractual lease commitments over the contracted sublease revenue and $1,861,000 for the write-off of related leasehold improvements and furniture and fixtures.

The activity related to the January 2004 reorganization during the nine months ended September 30, 2005 is as follows:

	Accrued as of				Accrued as of
	December 31,		Cash		September 30,
	2004		Payments		2005
			(IN THOUSANDS)
Workforce reduction	$	442	$	363	$	79
Facility consolidation and other related costs		4,218		961		3,257
Total	$	4,660	$	1,324	$	3,336

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The accrued costs related to the 2004 reorganizations are expected to be paid in the following periods:

	TOTAL		2005		2006		2007		2008		2009		Thereafter
	(IN THOUSANDS)
Workforce reduction	$	79	$	79	$	—	$	—	$	—	$	—	$	—
Facility consolidation and other related costs		3,257		307		1,224		1,208		166		178		174
Total	$	3,336	$	386	$	1,224	$	1,208	$	166	$	178	$	174

In connection with prior reorganizations of its workforce, Forrester has consolidated its office space. As a result of these consolidations, Forrester has aggregate accrued facility consolidation costs of $106,000 as of September 30, 2005. The activity related to these costs during the nine months ended September 30, 2005 is as follows:

	Accrued as of				Accrued as of
	December 31,		Cash		September 30,
	2004		Payments		2005
	(IN THOUSANDS)
Facility costs	$	677	$	571	$	106

These accrued facility costs are expected to be paid in the following periods:

	TOTAL		2005		2006
	(IN THOUSANDS)
Facility costs	$	106	$	18	$	88

NOTE 5 — NET INCOME PER COMMON SHARE

Basic net income per common share for the three and nine months ended September 30, 2005 and 2004 was computed by dividing the net income by the basic weighted average number of common shares outstanding during the period. Diluted net income per common share for the three and nine months ended September 30, 2005 and 2004 was computed by dividing net income by the diluted weighted average number of common shares outstanding during the period. The weighted average number of common equivalent shares outstanding has been determined in accordance with the treasury-stock method. Common stock equivalents consist of common stock issuable on the exercise of outstanding options when dilutive. A reconciliation of basic to diluted weighted average shares outstanding is as follows:

	THREE MONTHS ENDED				NINE MONTHS ENDED
	SEPTEMBER 30,				SEPTEMBER 30,
	2005		2004		2005		2004
	(IN THOUSANDS)
Basic weighted average common shares outstanding		21,287		21,952		21,470		22,094
Weighted average common equivalent shares		644		393		402		483
Diluted weighted average shares outstanding		21,931		22,345		21,872		22,577

During the-three month periods ended September 30, 2005 and 2004, options to purchase approximately 1,136,336 and 2,772,000 shares of common stock, respectively, were excluded from the calculation of diluted weighted average shares outstanding as the effect would have been anti-dilutive.

During the nine-month periods ended September 30, 2005 and 2004, options to purchase approximately 2,395,466 and 2,459,000 shares of common stock, respectively, were excluded from the calculation of diluted weighted average shares outstanding as the effect would have been anti-dilutive.

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NOTE 6 — COMPREHENSIVE INCOME

The components of total comprehensive income (loss) for the three and nine months ended September 30, 2005 and 2004 are as follows:

	THREE MONTHS ENDED						NINE MONTHS ENDED
	SEPTEMBER 30,						SEPTEMBER 30,
	2005			2004			2005			2004
	(IN THOUSANDS)
	(restated)						(restated)
Unrealized (loss) gain on marketable securities, net of taxes	$	(103	)	$	1,487		$	(464	)	$	756
Reclassification adjustment for realized gains in net income, net of taxes		—			—			(1,122	)		—
Cumulative translation adjustment		61			(94	)		787			(253	)
Total other comprehensive (loss) income	$	(42	)	$	1,393		$	(799	)	$	503
Reported net income		2,558			3,211			7,754			606
Total comprehensive income	$	2,516		$	4,604		$	6,955		$	1,109

NOTE 7 — MARKETABLE INVESTMENT

As of March 31, 2004, Forrester held an approximately 1.1% ownership interest in Greenfield Online, Inc. (“Greenfield”), an Internet-based market research firm. This investment was accounted for as a cost basis investment and valued at approximately $267,000 as of March 31, 2004. In July 2004, Greenfield (NASDAQ: SRVY) completed an initial public offering in which Forrester’s ownership interest was converted to approximately 136,000 shares of common stock. Upon consummation of the offering, Forrester received a conversion payment of approximately $463,000, and participated in the offering by selling approximately 21,000 shares of common stock for which net proceeds of approximately $256,000 were received. In December 2004, Greenfield completed a secondary offering in which Forrester participated and sold an additional 26,000 shares of common stock, receiving net proceeds of approximately $445,000. In March 2005, Forrester sold the remainder of its holdings, approximately 89,000 shares of common stock, received net proceeds of approximately $1.7 million and recognized a gain of approximately $1.5 million related to the sale of these shares.

NOTE 8 — NON-MARKETABLE INVESTMENTS

In June 2000, Forrester committed to invest $20.0 million in two technology-related private equity investment funds with capital contributions required to be funded over an expected period of five years. During the three months ended September 30, 2005 and 2004, Forrester contributed approximately $425,000 and $412,500 to these investment funds, respectively. During the nine months ended September 30, 2005 and 2004, Forrester contributed approximately $738,000 and $2.0 million to these investment funds, respectively, resulting in total cumulative contributions of approximately $18.6 million to date. One of these investments is being accounted for using the cost method and, accordingly, is valued at cost unless an other than temporary impairment in its value occurs or the investment is liquidated. The other investment is being accounted for using the equity method. During the three and nine months ended September 30, 2005, gains of $241,000 and $532,000, respectively, were recorded in the consolidated statements of income related to distributions received. During the three and nine months ended September 30, 2004, gains of $313,000 and $370,000, respectively, were recorded in the consolidated statements of income related to distributions received. During the three and nine months ended September 30, 2005 and 2004 there were no impairments recorded. During the three months and nine months ended September 30, 2005 and 2004, fund management charges of approximately $84,000 and $253,000 were included in other income, net for each period in the consolidated statements of income, respectively, bringing the total cumulative fund management charges paid by Forrester to approximately $2.2 million as of September 30, 2005. Fund management charges are recorded as a reduction of the investments’ carrying value.

Forrester has adopted a cash bonus plan to pay bonuses, after the return of invested capital, measured by the proceeds of a portion of its share of net profits from these investments, if any, to certain key employees, subject to the terms and conditions of the plan. The payment of such bonuses would result in compensation expense with respect to the amounts so paid. To date, no bonuses have been paid under this plan. The principal purpose of this

12

cash bonus plan was to retain key employees by allowing them to participate in a portion of the potential return from Forrester’s technology-related investments if they remained employed by the Company. The plan was established at a time when technology and internet companies were growing significantly, and providing incentives to retain key employees during that time was important.

The timing of the recognition of future gains or losses from these investment funds is beyond Forrester’s control. As a result, it is not possible to predict when Forrester will recognize such gains or losses, if Forrester will award cash bonuses based on the net profit from such investments, or when Forrester will incur compensation expense in connection with the payment of such bonuses. If the investment funds realize large gains or losses on their investments, Forrester could experience significant variations in its quarterly results unrelated to its business operations. These variations could be due to significant gains or losses or to significant compensation expenses. While gains may offset compensation expenses in a particular quarter, there can be no assurance that related gains and compensation expenses will occur in the same quarters.

NOTE 9 — STOCK REPURCHASE

In October 2001, Forrester announced a program authorizing the repurchase of up to $50.0 million of its common stock. The shares repurchased may be used, among other things, in connection with Forrester’s employee stock option and stock purchase plans and for potential acquisitions. In February 2005, the Board of Directors authorized the repurchase of up to an additional $50.0 million of common stock. As of September 30, 2005, Forrester had repurchased approximately 3,987,000 shares of common stock at an aggregate cost of approximately $66.3 million.

NOTE 10 — OPERATING SEGMENT AND ENTERPRISE WIDE REPORTING

During 2004, Forrester viewed its operations within the following three operating groups (“Operating Groups”): (i) North America, (ii) Europe and, (iii) World Markets which includes Asia, Middle East, Africa, and Latin America. Effective January 1, 2005, Forrester reorganized the operating groups as follows (i) Americas, (ii) Europe, Middle East and Africa (EMEA) and (iii) Asia Pacific. All of the Operating Groups generate revenues through sales of the same research and advisory and other service offerings. Each of the Operating Groups is composed of sales forces responsible for clients located in such Operating Group’s region and research personnel focused primarily on issues generally more relevant to clients in that region. Forrester evaluates reportable segment performance and allocates resources based on direct margin. Direct margin, as presented below, is defined as operating income excluding certain selling and marketing expenses, general and administrative expenses, depreciation expense, amortization of intangibles, non-cash stock-based compensation expense and reorganization charges. The accounting policies used by the reportable segments are the same as those used by Forrester.

Forrester does not identify or allocate assets, including capital expenditures, by operating segment. Accordingly, assets are not being reported by segment because the information is not available by segment and is not reviewed in the evaluation of performance or making decisions in the allocation of resources.

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The following tables present information about reportable segments. Segment information for the three and nine months ended September 30, 2004 has been restated to conform to the current year’s presentation.

	Americas		EMEA		Asia Pacific		Consolidated
Three months ended September 30, 2005 (restated)
Revenue	$	30,087	$	7,518	$	1,420	$	39,025
Direct Margin		12,270		598		496		13,364
Corporate expenses								(8,516	)
Amortization of intangible assets								(786	)
Reorganization costs								—
Income from operations							$	4,062
Three months ended September 30, 2004
Revenue	$	25,722	$	6,786	$	1,371	$	33,879
Direct Margin		10,969		788		787		12,544
Corporate expenses								(8,002	)
Amortization of intangible assets								(1,384	)
Reorganization costs								—
Income from operations							$	3,158
Nine months ended September 30, 2005 (restated)
Revenue	$	85,039	$	22,662	$	4,352	$	112,053
Direct Margin		32,272		1,102		1,929		35,303
Corporate expenses								(23,118	)
Amortization of intangible assets								(2,742	)
Reorganization costs								—
Income from operations							$	9,443
Nine months ended September 30, 2004
Revenue	$	75,089	$	21,212	$	4,228	$	100,529
Direct Margin		30,476		1,724		2,452		34,652
Corporate expenses								(23,094	)
Amortization of intangible assets								(5,112	)
Reorganization costs								(8,751	)
Loss from operations							$	(2,305	)

Net revenues by geographic client location and as a percentage of total revenues are as follows:

	THREE MONTHS ENDED				NINE MONTHS ENDED
	SEPTEMBER 30,				SEPTEMBER 30,
	2005		2004		2005		2004
	(IN THOUSANDS)
United States	$	27,681	$	22,813	$	78,142	$	67,676
Europe (excluding United Kingdom)		4,657		4,728		13,958		13,475
United Kingdom		2,983		2,871		8,936		9,095
Canada		1,843		1,651		5,679		4,874
Other		1,861		1,816		5,338		5,409
	$	39,025	$	33,879	$	112,053	$	100,529

	THREE MONTHS ENDED						NINE MONTHS ENDED
	SEPTEMBER 30,						SEPTEMBER 30,
	2005			2004			2005			2004
United States		71	%		67	%		70	%		67	%
Europe (excluding United Kingdom)		12			14			12			13
United Kingdom		8			9			8			9
Canada		5			5			5			5
Other		4			5			5			6
		100	%		100	%		100	%		100	%

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NOTE 11 — RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, the Financial Accounting Standards Board (FASB) revised SFAS No. 123 (SFAS No. 123-R) which requires the measurement of the cost of employee services received in exchange for an award of an equity instrument based on the grant-date fair value of the award. The measured cost is to be recognized over the period during which an employee is required to provide service in exchange for the award, usually the vesting period. The provisions of SFAS No. 123-R are effective for all employee equity awards granted and to any unvested awards outstanding as of January 1, 2006. Retrospective application is permitted. The adoption of this statement is expected to have a material adverse impact on Forrester’s results of operations. Forrester is currently assessing the transition method it will use upon adoption.

In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets”, which eliminates the exception of fair value measurement for nonmonetary exchanges of similar productive assets in existing accounting literature and replaces it with an exception for exchanges that do not have commercial substance. SFAS No. 153 specifies that a nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The provisions of SFAS No. 153 are effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Adoption of this statement is not expected to have a material impact on Forrester’s financial position and results of operations.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “expects,” “believes,” “anticipates,” “intends,” “plans,” “estimates,” or similar expressions are intended to identify these forward-looking statements. These statements include, but are not limited to, statements about the success of and demand for our research and advisory products and services, and our ability to achieve success as the industry consolidates. These statements are based on our current plans and expectations and involve risks and uncertainties that could cause actual future activities and results of operations to be materially different from those set forth in the forward-looking statements. Important factors that could cause actual future activities and results to differ include, among others, our ability to anticipate business and economic conditions, market trends, competition, the ability to attract and retain professional staff, possible variations in our quarterly operating results, risks associated with our ability to offer new products and services, the actual amount of the charge and any cost savings related to reductions in force and associated actions, and our dependence on renewals of our membership-based research services and on key personnel. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

We derive revenues from memberships to our research product offerings and from our advisory services and events available through what we refer to as Research, Data, Consulting, and Community offerings. We offer contracts for our research products that are typically renewable annually and payable in advance. Research revenues are recognized as revenue ratably over the term of the contract. Accordingly, a substantial portion of our billings are initially recorded as deferred revenue. Clients purchase advisory services offered through our Data, Consulting and Community products and services to supplement their memberships to our research. Billings attributable to advisory services are initially recorded as deferred revenue and are recognized as revenue when performed. Event billings are also initially recorded as deferred revenue and are recognized as revenue upon completion of each event. Consequently, changes in the number and value of client contracts, both net decreases as well as net increases, impact our revenues and other results over a period of several months.

Our primary operating expenses consist of cost of services and fulfillment, selling and marketing expenses, general and administrative expenses, depreciation and amortization of intangible assets. Cost of services and fulfillment represents the costs associated with the production and delivery of our products and services, and it includes the costs of salaries, bonuses, and related benefits for research personnel and all associated editorial, travel, and support services. Selling and marketing expenses include salaries, employee benefits, travel expenses, promotional costs, sales commissions, and other costs incurred in marketing and selling our products and services. General and

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administrative expenses include the costs of the technology, operations, finance, and strategy groups and our other administrative functions. Overhead costs are allocated over these categories according to the number of employees in each group. Amortization of intangible assets represents the cost of amortizing acquired intangible assets such as customer relationships.

Agreement value, client retention, dollar retention and enrichment are metrics we believe are important to understanding our business. We believe that the “agreement value” of contracts to purchase research and advisory services provides a significant measure of our business volume. We calculate agreement value as the total revenues recognizable from all research and advisory service contracts in force at a given time, without regard to how much revenue has already been recognized. No single client accounted for more than 3% of agreement value at September 30, 2005. We calculate client retention as the number of client companies who renewed with memberships as a percentage of those that would have expired. We calculate dollar retention as a percentage of the dollar value of all client membership contracts renewed during the most recent twelve-month fiscal period to the total dollar value of all client membership contracts that expired during the period. We calculate enrichment as a percentage of the dollar value of client membership contracts renewed during the period to the dollar value of the corresponding expiring contracts. Client retention, dollar retention, and enrichment are not necessarily indicative of the rate of future retention of our revenue base. A summary of our key metrics is as follows:

							Absolute			Percentage
	SEPTEMBER 30,						Increase			Increase
	2005			2004			(Decrease)			(Decrease)
Agreement Value (In Millions)	$	133.9		$	125.4		$	8.5			6.8	%
Client Retention		78.0	%		75.0	%		3.0	%		4.0	%
Dollar Retention		88.0	%		86.0	%		2.0	%		2.3	%
Enrichment		105.0	%		113.0	%		(8.0	)%		(7.1	)%
Number of clients		1,957			1,832			125			6.8	%

The increase in agreement value from September 30, 2004 to September 30, 2005 is primarily due to an increase in the number of clients. Client retention and dollar retention increases in 2005 reflect an improving economic environment. The decrease in enrichment reflects more clients renewing memberships at the same level as the prior year, coupled with an increase in advisory-only contracts from clients purchased during the membership term.

RESTATEMENT

On January 31, 2006, we announced that we would restate certain of our previously issued financial statements because they contained errors under GAAP relating to the accounting for performance-based stock options to purchase 940,500 shares of common stock granted on March 31, 2005. The necessary restatement required the recording of approximately $729,000 and $1,019,000 of non-cash stock-based compensation expense and $60,000 and $83,000 of related tax benefit, for the three and nine month periods ended September 30, 2005, respectively.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management’s discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our policies and estimates, including but not limited to, those related to our revenue recognition, allowance for doubtful accounts, non-marketable investments, goodwill and other intangible assets and income taxes. Management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We consider the following accounting policies to be those that require that most subjective judgment or those most important to the portrayal of our financial condition and results of operations. If actual results differ significantly

16

from management’s estimates and projections, there could be a material effect on our financial statements. This is not a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by generally accepted accounting principles, with no need for management’s judgment in their application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. For further discussion of the application of these and our other accounting policies, see Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2004, previously filed with the SEC.

• REVENUE RECOGNITION. We generate revenues from licensing research, performing advisory services, and hosting events. We execute contracts that govern the terms and conditions of each arrangement. Revenues from contracts that contain multiple deliverables are allocated among the separate units based on their relative fair values, the estimate of which requires us to make estimates of such fair values. The amount of revenue recognized is limited to the amount that is not contingent on future performance conditions. Research service revenues are recognized ratably over the term of the agreement. Advisory service revenues are recognized during the period in which the services are performed. Events revenues are recognized upon completion of the events. In certain cases, where estimates of fair value cannot be made for events or advisory services, the amounts are recognized ratably and included in research service revenues. While our historical business practice has been to offer membership contracts with a non-cancelable term, effective April 1, 2005, we offer clients a money back guarantee, which gives them the right to cancel their membership contracts prior to the end of the contract term. For contracts that can be terminated during the contract term, any refund would be issued on a pro-rata basis only. Reimbursed out of pocket expenses are recorded as advisory revenue. Furthermore, our revenue recognition determines the timing of commission expenses that are deferred and expensed to operations as the related revenue is recognized. We evaluate the recoverability of deferred commissions at each balance sheet date. As of September 30, 2005, deferred revenues and deferred commissions totaled $67.7 million and $6.3 million, respectively.

• ALLOWANCE FOR DOUBTFUL ACCOUNTS. We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make contractually obligated payments that totaled approximately $831,000 as of September 30, 2005. Management specifically analyzes accounts receivable and historical bad debts, customer concentrations, current economic trends, and changes in our customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required, and if the financial condition of our customers were to improve, the allowances may be reduced accordingly.

• NON-MARKETABLE INVESTMENTS. We hold minority interests in technology-related companies and equity investment funds that totaled approximately $13.5 million as of September 30, 2005. These investments are in companies that are not publicly traded, and, therefore, because no established market for these securities exists, the estimate of the fair value of our investments requires significant judgment. We have a policy in place to review the fair value of our investments on a regular basis to evaluate the carrying value of the investments in these companies which consists primarily of reviewing the investee’s revenue and earnings trends relative to predefined milestones and overall business prospects. We record impairment charges when we believe that an investment has experienced a decline in value that is other than temporary. During the three and nine months ended September 30, 2005, we have no investments that have experienced a decline in value which we believe is permanent or temporary and accordingly no impairment charges have been recorded. Future adverse changes in market conditions or poor operating results of underlying investments could result in losses or an inability to recover the carrying value of the investments that may not be reflected in an investment’s current carrying value, thereby possibly requiring an impairment charge in the future.

• GOODWILL AND OTHER INTANGIBLE ASSETS. At September 30, 2005, we had goodwill and identified intangible assets with finite lives related to our acquisitions that totaled approximately $52.9 million and $4.3 million, respectively. SFAS No. 142, “Goodwill and Other Intangible Assets”, requires that goodwill and intangible assets with indefinite lives no longer be amortized but instead be measured for impairment at least annually or whenever events indicate that there may be an impairment. In order to determine if an impairment exists, an analysis is done which determines if the carrying amount of the reporting unit exceeds the fair value.

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	The estimates of the reporting unit’s fair value are based on market conditions and operational performance. Absent an event that indicates a specific impairment may exist, we have selected November 30th as the date of performing the annual goodwill impairment test. As of September 30, 2005, we believe that the carrying value of our goodwill is not impaired. Future events could cause us to conclude that impairment indicators exist and that goodwill associated with our acquired businesses is impaired. Any resulting impairment loss could have a material adverse impact on our financial condition and results of operations.
	Intangible assets with finite lives are valued according to the future cash flows they are estimated to produce. These assigned values are amortized on an accelerated basis which matches the periods those cash flows are estimated to be produced. We continually evaluate whether events or circumstances have occurred that indicate that the estimated remaining useful life of our intangible assets may warrant revision or that the carrying value of these assets may be impaired. To compute whether assets have been impaired, the estimated undiscounted future cash flows for the estimated remaining useful life of the assets are compared to the carrying value. To the extent that the future cash flows are less than the carrying value, the assets are written down to the estimated fair value of the asset.
•	INCOME TAXES. We have deferred tax assets related to temporary differences between the financial statement and tax bases of assets and liabilities as well as operating loss carryforwards (primarily from stock option exercises and the acquisition of Giga) that totaled approximately $43.3 million as of September 30, 2005. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible and the carryforwards expire. Although realization is not assured, based upon the level of our historical taxable income and projections for our future taxable income over the periods during which the deferred tax assets are deductible and the carryforwards expire, management believes it is more likely than not that we will realize the benefits of these deductible differences. The amount of the deferred tax asset considered realizable, however, could be reduced if estimates of future taxable income during the carry-forward periods are incorrect.

RESULTS OF OPERATIONS

The following table sets forth selected financial data as a percentage of total revenues for the periods indicated:

	THREE MONTHS ENDED						NINE MONTHS ENDED
	SEPTEMBER 30,						SEPTEMBER 30,
	2005			2004			2005			2004
Research services		64	%		69	%		64	%		69	%
Advisory services and other		36			31			36			31
Total revenues		100			100			100			100
Cost of services and fulfillment		40			39			41			40
Selling and marketing		33			33			34			33
General and administrative		12			13			12			12
Depreciation		2			2			2			3
Amortization of intangible assets		2			4			2			5
Reorganization costs		—			—			—			9
Income (loss) from operations		11			9			9			(2	)
Other income, net		2			2			2			2
Realized gains on sales of securities		—			2			1			1
Realized gains on non-marketable investments		—			1			—			—
Income before income tax provision		13			14			12			1
Income tax provision		6			5			5			—
Net income		7	%		9	%		7	%		1	%

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THREE MONTHS ENDED SEPTEMBER 30, 2005 AND SEPTEMBER 30, 2004

REVENUES.

	THREE MONTHS ENDED						Absolute			Percentage
	SEPTEMBER 30,						Increase			Increase
	2005			2004			(Decrease)			(Decrease)
Revenues (in millions)	$	39.0		$	33.9			5.1			15	%
Revenues from research services (in millions)	$	25.0		$	23.5			1.5			6	%
Advisory services and other revenues (in millions)	$	14.0		$	10.3			3.7			36	%
Revenues attributable to customers outside of the United States (in millions)	$	11.3		$	11.1			0.2			2	%
Revenues attributable to customers outside of the United States as a percentage of total revenues		29	%		33	%		(4	)%		(12	)%
Number of events		1			1			—			—

The increase in total revenues is primarily attributable to increased demand for advisory services, improving economic conditions and an increase in the number of clients. No single client company accounted for more than 3% of revenues during the three months ended September 30, 2005 or 2004.

Research services revenues as a percentage of total revenues declined from 69% in the three months ended September 30, 2004 to 64% in the three months ended September 30, 2005 as customer demand is shifting towards advisory services. The increase in advisory services and other revenues is primarily attributable to increased demand for more customized services.

The decrease in international revenues as a percentage of total revenues is primarily attributable to demand for our products and services growing at a faster rate domestically than internationally. International revenues increased 2% to $11.3 million in the three months ended September 30, 2005 from $11.1 million in the three months ended September 30, 2004.

COST OF SERVICES AND FULFILLMENT.

	THREE MONTHS ENDED						Absolute			Percentage
	SEPTEMBER 30,						Increase			Increase
	2005			2004			(Decrease)			(Decrease)
Cost of services and fulfillment (in millions)	$	15.8		$	13.3		$	2.5			19	%
Cost of services and fulfillment as a percentage of total revenues		40	%		39	%		1	%		3	%
Number of research and fulfillment employees		317			265			52			20	%

The increase in cost of services and fulfillment both in dollars and as a percentage of total revenues is primarily attributable to increased compensation costs resulting from an increase in the number of research employees, the recording of non-cash stock-based compensation expense related to the March 31, 2005 grant, increased survey costs and increased incentive compensation paid for the performance of advisory services.

SELLING AND MARKETING.

	THREE MONTHS ENDED						Absolute		Percentage
	SEPTEMBER 30,						Increase		Increase
	2005			2004			(Decrease)		(Decrease)
Selling and marketing expenses (in millions)	$	12.7		$	11.0		$	1.7		15	%
Selling and marketing expenses as a percentage of total revenues		33	%		33	%		—		—
Number of selling and marketing employees		254			218			36		17	%

The increase in selling and marketing expenses is primarily attributable to increased compensation expense resulting from an increase in average headcount, annual increases in compensation costs, costs associated with the Forrester

19

magazine, the first issue of which was published in February 2005, and the recording of non-cash stock-based compensation expense related to the March 31, 2005 grant.

GENERAL AND ADMINISTRATIVE.

	THREE MONTHS ENDED						Absolute			Percentage
	SEPTEMBER 30,						Increase			Increase
	2005			2004			(Decrease)			(Decrease)
General and administrative expenses (in millions)	$	4.8		$	4.3		$	0.5			12	%
General and administrative expenses as a percentage of total revenues		12	%		13	%		(1	)%		(8	)%
Number of general and administrative employees		95			85			10			12	%

The increase in general and administrative expenses is primarily attributable to increased compensation expense resulting from an increase in average headcount, annual increases in compensation costs and the recording of non-cash stock-based compensation expense related to the March 31, 2005 grant. The decrease in general and administrative expenses as a percentage of revenue is primarily attributable to an increased revenue base.

DEPRECIATION. Depreciation expense increased 15% to $859,000 in the three months ended September 30, 2005 from $744,000 in the three months ended September 30, 2004. The increase is primarily attributable to computer and software assets purchases.

AMORTIZATION OF INTANGIBLE ASSETS. Amortization of intangible assets decreased to $786,000 in the three months ended September 30, 2005 from $1.4 million in the three months ended September 30, 2004. This decrease in amortization expense is primarily attributable to the accelerated method we are using to amortize our acquired intangible assets according to the expected cash flows to be received from these assets. Additionally, research content and registered trademarks that were acquired in connection with the acquisition of Giga Information Group, Inc. in 2003 were fully amortized by the end of 2004.

OTHER INCOME, NET. Other income, net, consisting primarily of interest income, increased 6% to $722,000 during the three months ended September 30, 2005 from $680,000 during the three months ended September 30, 2004. The increase is primarily attributable to an increase in the average cash and investment balances available for investment in 2005 as compared to 2004.

REALIZED GAINS ON NON-MARKETABLE INVESTMENTS. Gains on non-marketable investments resulted from a distribution from one of our investments and totaled $241,000 and $313,000 in the three months ended September 30, 2005 and 2004, respectively.

PROVISION FOR INCOME TAXES. During the three months ended September 30, 2005, we recorded an income tax provision of $2.5 million, which reflected an effective tax rate of 49%. During the three months ended September 30, 2004, we recorded an income tax provision of $1.6 million, which reflected an effective tax rate of 33.5%. The increase in our effective tax rate for fiscal year 2005 resulted primarily from a decrease in tax-exempt investment income relative to our pre-tax income in 2005 as compared to 2004, and an increase relative to our pre-tax income of the non-deductible amortization of bond premium paid on tax-exempt bonds.

NINE MONTHS ENDED SEPTEMBER 30, 2005 AND SEPTEMBER 30, 2004

REVENUES.

	NINE MONTHS ENDED						Absolute			Percentage
	SEPTEMBER 30,						Increase			Increase
	2005			2004			(Decrease)			(Decrease)
Revenues (in millions)	$	112.1		$	100.5			11.6			12	%
Revenues from research services (in millions)	$	72.2		$	69.6			2.6			4	%
Advisory services and other revenues (in millions)	$	39.9		$	31.0			8.9			29	%
Revenues attributable to customers outside of the United States (in millions)	$	33.9		$	32.9			1.1			3	%
Revenues attributable to customers outside of the United States as a percentage of total Revenues		30	%		33	%		(3	)%		(9	)%

20

	NINE MONTHS ENDED				Absolute		Percentage
	SEPTEMBER 30,				Increase		Increase
	2005		2004		(Decrease)		(Decrease)
Number of events		5		4		1		25	%

The increase in total revenues is primarily attributable to increased demand for advisory services, improving economic conditions and an increase in the number of clients. No single client company accounted for more than 2% of revenues during the nine months ended September 30, 2005 or 2004.

Research services revenues as a percentage of total revenues declined from 69% in the nine months ended September 30, 2004 to 64% in the nine months ended September 30, 2005 as customer demand is shifting towards advisory services. The increase in advisory services and other revenues is primarily attributable to increased demand for more customized services.

The decrease in international revenues as a percentage of total revenues is primarily attributable to demand for our products and services growing at a faster rate domestically than internationally. International revenues increased 3% to $33.9 million in the nine months ended September 30, 2005 from $32.9 million in the nine months ended September 30, 2004.

COST OF SERVICES AND FULFILLMENT.

	NINE MONTHS ENDED						Absolute			Percentage
	SEPTEMBER 30,						Increase			Increase
	2005			2004			(Decrease)			(Decrease)
Cost of services and fulfillment (in millions)	$	46.2		$	40.8		$	5.4			13	%
Cost of services and fulfillment as a percentage of total revenues		41	%		40	%		1	%		3	%
Number of research fulfillment employees		317			265			52			20	%

The increase in cost of services and fulfillment both in dollars and as a percentage of total revenues is primarily attributable to increased compensation costs resulting from an increase in the number of research employees and the recording of non-cash stock-based compensation expense related to the March 31, 2005 grant, increased survey costs and increased incentive compensation paid for the performance of advisory services.

SELLING AND MARKETING.

	NINE MONTHS ENDED						Absolute			Percentage
	SEPTEMBER 30,						Increase			Increase
	2005			2004			(Decrease)			(Decrease)
Selling and marketing expenses millions)	$	37.7		$	33.7		$	4.0			12	%
Selling and marketing expenses as a percentage of total revenues		34	%		33	%		1	%		3	%
Number of selling and marketing employees		254			218			36			17	%

The increase in selling and marketing expenses both in dollars and as a percentage of total revenues is primarily attributable to increased compensation expense resulting from an increase in average headcount, annual increases in compensation costs, costs associated with the Forrester magazine, the first issue of which was published in February 2005, and the recording of non-cash stock-based compensation expense related to the March 31, 2005 grant.

GENERAL AND ADMINISTRATIVE.

	NINE MONTHS ENDED						Absolute		Percentage
	SEPTEMBER 30,						Increase		Increase
	2005			2004			(Decrease)		(Decrease)
General and administrative expenses (in millions)	$	13.4		$	11.7		$	1.7		15	%
General and administrative expenses as a percentage of total revenues		12	%		12	%		—		—
Number of general and administrative employees		95			85			10		12	%

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The increase in general and administrative expenses is primarily attributable to increased compensation expense resulting from an increase in average headcount, annual increases in compensation costs and the recording of non-cash stock-based compensation expense related to the March 31, 2005 grant.

DEPRECIATION. Depreciation expense decreased 7% to $2.6 million in the nine months ended September 30, 2005 from $2.8 million in the nine months ended September 30, 2004. The decrease is primarily attributable to computer and software assets purchased prior to 2002 becoming fully depreciated and to the write-off of certain depreciable assets in connection with office vacancies.

AMORTIZATION OF INTANGIBLE ASSETS. Amortization of intangible assets decreased to $2.7 million in the nine months ended September 30, 2005 from $5.1 million in the nine months ended September 30, 2004. This decrease in amortization expense is primarily attributable to the accelerated method we are using to amortize our acquired intangible assets according to the expected cash flows to be received from these assets. Additionally, research content and registered trademarks that were acquired in connection with the acquisition of Giga Information Group, Inc. in 2003 were fully amortized by the end of 2004.

OTHER INCOME, NET. Other income, net, consisting primarily of interest income, was $2.2 million during the nine months ended September 30, 2005 and 2004 as a result of an increase in the average cash and investment balances available for investment in 2005 as compared to 2004 offset by lower returns on invested capital.

REALIZED GAINS ON SALES OF SECURITIES. Gains on sales of securities primarily resulted from the sale of the remaining total of approximately 89,000 shares of Greenfield Online, Inc. in March 2005.

REALIZED GAINS ON NON-MARKETABLE INVESTMENTS. Gains on non-marketable investments resulted from a distributions from one of our investments and totaled $532,000 and $370,000 in the nine months ended September 30, 2005 and 2004, respectively.

REORGANIZATION COSTS. Reorganization costs in the nine months ended September 30, 2004 consisted primarily of costs associated with lease losses and fixed-asset write-offs resulting from office vacancies.

PROVISION FOR INCOME TAXES. During the nine months ended September 30, 2005, we recorded an income tax provision of $5.9 million, which reflected an effective tax rate of 43%. During the nine months ended September 30, 2004, we recorded an income tax provision of $305,000, which reflected an effective tax rate of 33.5%. The increase in our effective tax rate for fiscal year 2005 resulted primarily from a decrease in tax-exempt investment income relative to our pre-tax income in 2005 as compared to 2004, and an increase relative to our pre-tax income of the non-deductible amortization of bond premium paid on tax-exempt bonds.

LIQUIDITY AND CAPITAL RESOURCES

We have financed our operations primarily through funds generated from operations. Memberships for research services, which constituted approximately 64% of our revenues during the nine months ended September 30, 2005, are annually renewable and are generally payable in advance. We generated cash from operating activities of $19.9 million and $13.6 million during the nine months ended September 30, 2005 and 2004, respectively. The increase in cash provided from operations is primarily attributable to the increase in our income from operations.

During the nine months ended September 30, 2005, we generated $4.8 million of cash from investing activities, consisting primarily of $6.2 million received from net sales of marketable securities, offset by $2.4 million for capital expenditures. We regularly invest excess funds in short-and intermediate-term interest-bearing obligations of investment grade.

In June 2000, we committed to invest $20.0 million in two technology-related private equity investment funds over an expected period of five years. As of September 30, 2005, we had contributed approximately $18.6 million to the funds. The timing and amount of future contributions are entirely within the discretion of the investment funds. In July 2000, we adopted a cash bonus plan to pay bonuses, after the return of invested capital, measured by the proceeds of a portion of the share of net profits from these investments, if any, to certain key employees who must remain employed with us at the time any bonuses become payable under the plan, subject to the terms and

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conditions of the plan. The principal purpose of this cash bonus plan was to retain key employees by allowing them to participate in a portion of the potential return from Forrester’s technology-related investments if they remained employed by the Company. The plan was established at a time when technology and internet companies were growing significantly, and providing incentives to retain key employees during that time was important. To date, we have not paid any bonuses under this plan.

In December 2003, we committed to invest an additional $2.0 million over an expected period of two years in an annex fund of one of the two private equity investment funds. As of September 30, 2005, we had contributed approximately $1.6 million to the annex fund. The timing of this additional investment is within the discretion of the fund.

During the nine months ended September 30, 2005, we used $9.1 million of cash in financing activities, consisting of $16.3 million for repurchases of our common stock offset by $7.2 million in proceeds from the exercise of employee stock options and the issuance of common stock under our employee stock purchase plan.

In February 2005, our Board of Directors authorized an additional $50.0 million to purchase common stock under the stock repurchase program. During the nine months ended September 30, 2005, we repurchased 942,000 shares of common stock at an aggregate cost of approximately $16.3 million. As of September 30, 2005, we had cumulatively repurchased approximately 4.0 million shares of common stock at an aggregate cost of approximately $66.3 million.

As of September 30, 2005, we had cash and cash equivalents of $52.5 million and marketable securities of $82.1 million. We do not have a line of credit and do not anticipate the need for one in the foreseeable future. We plan to continue to introduce new products and services and expect to make minimal investments in our infrastructure during the next 12 months. We believe that our current cash balance, marketable securities, and cash flows from operations will satisfy working capital, financing activities, and capital expenditure requirements for at least the next two years.

As of September 30, 2005, we had future contractual obligations as follows for operating leases*:

	FUTURE PAYMENTS DUE BY YEAR
CONTRACTUAL OBLIGATIONS	TOTAL		2005		2006		2007		2008		2009		Thereafter
	(IN THOUSANDS)
Operating leases	$	40,052	$	2,374	$	7,540	$	7,724	$	6,397	$	6,317	$	9,700

* The above table does not include future minimum rentals to be received under subleases of $1.3 million. The above table also does not include the remaining $1.8 million of capital commitments to the private equity funds described above due to the uncertainty as to the timing of capital calls made by such funds.

We do not maintain any off-balance sheet financing arrangements.

ITEM 4. CONTROLS AND PROCEDURES

On January 31, 2006 we announced that certain of our previously issued financial statements contained an error under accounting principles generally accepted in the United States of America (“GAAP”) relating to the recording of non-cash stock-based compensation expense for performance-based stock options granted to employees on March 31, 2005. As a result, we determined that we needed to restate our financial statements for the period ended September 30, 2005. For a more detailed discussion regarding this restatement, see Note 2 to our consolidated financial statements included herein.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of September 30, 2005. As part of this evaluation management considered the facts and circumstances relating to the restatement discussed above and determined that there existed a material weakness with respect to our internal controls over financial reporting

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related to accounting for stock-based compensation. The material weakness resulted from weaknesses in the operation of controls established to ensure that any new option grants were properly accounted for. Based on this evaluation, management, including the CEO and CFO, concluded that our company’s disclosure controls and procedures were not operating effectively as of September 30, 2005.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 2005 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. However, in connection with the restatement discussed above, our internal controls over financial reporting have been subsequently modified to correct this situation, with the individuals responsible for the inadvertent error being appropriately educated. In addition, in connection with our preparation for the adoption of Statement of Financial Accounting Standards (“SFAS”) 123R, additional review procedures are being devised and are expected to be implemented shortly and we have allocated more resources to accounting for stock-based compensation.

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PART II. OTHER INFORMATION

ITEM 6. EXHIBITS

31.1	Certification of the Principal Executive Officer
31.2	Certification of the Principal Financial Officer
32.1	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	FORRESTER RESEARCH, INC.
	By:	/s/ George F. Colony
	George F. Colony
	Chairman of the Board of Directors and Chief
	Executive Officer (principal executive officer)
Date: February 28, 2006
	By:	/s/ Warren Hadley
	Warren Hadley
	Chief Financial Officer and Treasurer (principal
	financial and accounting officer)
Date: February 28, 2006

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Exhibit Index

Exhibit No.	Document
31.1	Certification of the Principal Executive Officer
31.2	Certification of the Principal Financial Officer
32.1	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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EX-31.1

Exhibit 31.1

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER

I, George F. Colony, certify that:

     1. I have reviewed this quarterly report on Form 10-Q/A of Forrester Research, Inc.;

     2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

     3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

     4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

     a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

     b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles

     c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

     a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/s/ GEORGE F. COLONY
	George F. Colony Chairman of the Board and Chief Executive Officer
	(Principal executive officer)
Date: February 28, 2006

EX-31.2

Exhibit 31.2

CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER

I, Warren Hadley, certify that:

     1. I have reviewed this quarterly report on Form 10-Q/A of Forrester Research, Inc.;

     2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

     3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

     4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

     a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

     b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles

     c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

     a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/s/ WARREN HADLEY
	Warren Hadley
	Chief Financial Officer and Treasurer
	(Principal financial and accounting
	officer)
Date: February 28, 2006

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO
SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, as Chief Executive Officer of Forrester Research, Inc. (the “Company”), does hereby certify that to the undersigned’s knowledge:

1)	the Company’s Quarterly Report on Form 10-Q/A for the three months ended September 30, 2005 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2)	the information contained in the Company’s Quarterly Report on Form 10-Q/A for the three months ended September 30, 2005 fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ George F. Colony
	George F. Colony Chairman of the Board of Directors and Chief Executive Officer
Dated: February 28, 2006

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO
SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, as Chief Financial Officer of Forrester Research, Inc. (the “Company”), does hereby certify that to the undersigned’s knowledge:

1)	the Company’s Quarterly Report on Form 10-Q/A for the three months ended September 30, 2005 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2)	the information contained in the Company’s Quarterly Report on Form 10-Q/A for the three months ended September 30, 2005 fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ Warren Hadley
	Warren Hadley Chief Financial Officer and Treasurer
Dated: February 28, 2006